National Defense Authorization Act for Fiscal Year 2018: A Preview of What s to Come. November 29, 2017

Transcription

1 ACC Government Contractors Forum National Defense Authorization Act for Fiscal Year 2018: A Preview of What s to Come November 29, 2017

2 Speakers Jim Thomas Partner, Government Contracts Specialist (703) Jade Totman The Boeing Company Senior Counsel Joe Smith Jenner & Block Partner, Chair, Government Contracts Practice Cynthia Robertson Jenner & Block Partner, Government Contracts, Investigations, Compliance & Defense Litigation

3 Agenda Welcome & Introductions Regulatory Relief Fact or Fiction 2018 National Defense Authorization Act Open Forum Q&A 3

4 Regulatory Relief Fact or Fiction 4

5 President Trump Implements Campaign Promises Sweeping changes to policy via executive action. Type of Executive Action How Many Since Taking Office? Executive Orders 51 Presidential Memoranda 34 Presidential Determinations 10 Presidential Proclamations 106 Reversal of President Obama s policies. New Trump policies based on campaign promises. - America First - Reduce Big Government - Make America Great Again 5

6 One Key Campaign Promise - Deregulation 6

7 Administrative Initiatives New framework for issuing regulations: one in, two out. Regulatory Freeze Pending Review, issued Jan. 20, Reducing Regulation and Controlling Costs, issued Jan. 30, Memorandum/guidance implementing one in, two out order, issued Feb. 2, 2017, and Apr. 5, Enforcing the Regulatory Reform Agenda, issued Feb. 24, Long history of Presidents modifying the standards for regulatory process. Usually more modest changes. President Trump s broad changes more challenging to implement. 7

8 Withdrawal of Existing Regulation The Trump administration said it was pulling or suspending 860 regulations. Of those, 469 were being completely withdrawn. Another 391 were being set aside or reevaluated. 8

9 Renewed Focus on Cost-Benefit Analysis Our philosophy has been that the previous administration fudged the numbers that they either overstated the benefits to people or understated the costs and we are going to look at it in a much more pragmatic perspective. 9

10 Agencies Request Industry Feedback Executive Order (EO) 13777, Enforcing the Regulatory Reform Agenda, directed federal agencies to establish Task Forces that must make recommendations to the agency head regarding [regulatory] repeal, replacement, or modification. GSA and DoD created separate Regulatory Reform Task Forces. Task Forces must evaluate regulation based on whether they: 1. Eliminate jobs, or inhibit job creation; 2. Are outdated, unnecessary, or ineffective; 3. Impose costs that exceed benefits; 4. Create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies; 5. Conflict with Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified. 10

11 GSA s Regulatory Reform Task Force In May, GSA proposed four separate rules to seek public input regarding repeal, replacement, or modification of four types of regulations, including those pertaining to: (1) acquisition; (2) leasing acquisition; (3) federal management and property management; and (4) federal travel. With respect to acquisition regulations, GSA s evaluation included both traditional rules as well as less formal policies, guidance, and business practices. Changes Thus Far: Class deviations issued to nullify the Fair Pay and Safe Workplaces final rule (also rescinded via EO and CRA). Based on industry feedback, GSA made participation in its Transactional Data Reporting (TDR) rule program voluntary for all contractors. 11

12 DoD s Regulatory Reform Task Force In June, the DFARS subgroup to DoD s Regulatory Reform Task Force sought comments to identify DFARS solicitation provisions and clauses for repeal, replacement, or modification. Will likely be shared with the Section 809 Panel. Section 809 Advisory Panel also recently issued its own notice for industry input as it prepares its report on streamlining and improving the DoD acquisition process. In October, DoD s primary Regulatory Reform Task Force issued a request for comments, seeking input on existing DoD regulations that may be appropriate for repeal, replacement, or modification. Comments are due by Jan. 22, Changes Thus Far: Class deviation issued eliminating the requirement for major contractors to engage in technical interchanges with the government prior to the generation of independent research and development (IR&D) costs. 12

13 Fewer Agency Personnel to Get the Work Done Many agency heads are in place, but you're missing all those positions between the Cabinet secretaries, and the sort of day-to-day work of government. The result, Light says: government is basically frozen. Paul Light, Professor of Public Service at NYU, quoted by National Public Radio. 13

14 Yet Administration Touts Progress 14

15 Useful Tools To Track Regulatory Developments 15

16 Unified Agenda of Regulatory and Deregulatory Actions 16

17 Another Means of Deregulation: Enhanced Use of the Congressional Review Act The Congressional Review Act (CRA) is a 1996 federal law that allows Congress to pass a joint resolution of disapproval, which, if signed by the president, can overturn new federal agency rules and block those agencies from creating similar rules in the future. Prior to 2017 the law was successfully used only once, to overturn a rule on ergonomics in the workplace in In the first four months of his administration, President Trump signed 14 CRA resolutions from Congress undoing a variety of rules issued near the end of President Obama s presidency. On November 1, 2017, President Trump signed a CRA resolution repealing a regulation issued by the Consumer Financial Protection Bureau, bringing the total number of rules repealed during his administration by that date to

18 Key Takeaways The flood of Obama-era regulations has stopped. Agencies are struggling to implement new regulatory framework (one in, two out) with interim leaders. Expect regulatory/deregulatory actions to begin trickling out (slowly). Participate in industry opportunities to advise administration about which regulations should be cut (or kept). Use this slow regulatory time to test internal compliance and conduct training on regulations likely here to stay. Beware of Obama-era regulations that are just being implemented in new contracts (Sick Leave for SCA contracts). Be prepared for changes. 18

19 FY18 NDAA Conference Report 19

20 Section 803 Performance of Incurred Cost Audits DoD shall use private auditors to perform incurred cost audits - Eliminate any backlog by October 1, Complete incurred cost audits within one year after receipt of a qualified incurred cost submission; otherwise, audit is complete - Maintain mix of government and private sector capacity - Improve audit efficiency and effectiveness - Limit multiyear auditing DoD will evaluate auditor conflicts of interest, independence and require nondisclosure agreements 20

21 Section 803 Performance of Incurred Cost Audits DoD shall award multiple contracts or task orders to qualified private auditors - Audits will be performed in accordance with government auditing standards - Working papers will be the property of DoD Section 804 repeals 2017 NDAA Section 820 requirement for acceptance of third party audits of incurred cost submissions Beginning October 1, 2022, DCAA must pass a peer review to issue unqualified audit findings DoD will submit an implementation plan by October 1,

22 Section 803 Performance of Incurred Cost Audits DoD shall comply with commercial standards of risk and materiality when performing incurred cost audits - Numeric materiality amounts consistent with commercial standards - DoD shall consult with: o o o Commercial auditors Advisory panel authorized by Section 809 of the FY 16 NDAA Other governmental and nongovernmental entities with relevant experience No repeal or amendment of the rules on expressly unallowable costs 22

23 Section 846 Procurement Through Commercial E-Commerce Portals Procurement of commercial products through commercial e- commerce portals to improve competition, timing, market research and reasonable pricing Includes disclosure, protection and use of information requirements Defines commercial product as a commercially available off-theshelf item, except it does not include services Use of standard terms and conditions of the portal relating to purchasing on the portal 23

24 Sections Additional Commercial Item Regulations Modifies definition of commercial item to include a nondevelopmental item that was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple state and local governments or to multiple foreign governments FAR Part 12 commercial item contracts shall serve as a prior commercial item determination Commercial item training program by engaging academic experts 24

25 Section 890 Comptroller General Report on Contractor Business System Requirements U.S. Comptroller General shall submit a report evaluating the contractor business systems program - Report due within one year of the enactment of the NDAA for FY 18 - Evaluate implementation and effectiveness of the business system program established pursuant to the FY 11 NDAA, including: o o o Whether the program has affected covered contractor performance or oversight of covered contracts Extent of third-party business systems audits Identify practices to enhance process for evaluating contractor business systems FY 11 NDAA required a similar report 25

26 Other Acquisition Policy Sections Increased thresholds - Section 805: Simplified acquisition threshold increased from $100,000 to $250,000 - Section 806: Micro-purchase threshold increased from $3,000 to $10,000 Section 807: Integration of supply chain risk management into the overall acquisition decision cycle Sections 811 and 812: Modifications to, and applicability of, submissions of cost or pricing data Section 815: Limits contracting officer unilateral definitization on undefinitized contractual actions greater than $50 million 26

27 Other Acquisition Policy Sections Section 837: Amendment to DFARS should-cost review process Section 883: Final report from the advisory panel on streamlining and codifying acquisition regulations is due January 15, 2019 Section 889: Requires DoD to submit a report on defense contracting fraud 27

28 2018 National Defense Authorization Act Section 820: Change to Definition of Subcontract in Certain Circumstances Adding at the end of 41 USC 1906 (c)(1): The term does not include agreements entered into by a contractor for the supply of commodities that are intended for use in the performance of multiple contracts with the Federal Government and other parties and are not identifiable to any particular contract. Current definition tells us what a subcontract includes (transfers between affiliates) but not what a subcontract is. The new provision still does not tell us what a subcontract is. Rather, it tells us what a subcontract is not. 28

29 2018 National Defense Authorization Act Section 802: Management of Intellectual Property Matters Within the Department of Defense New policy to be developed on the acquisition or licensing of IP To enable coordination and consistency across the DoD ins strategies for acquiring or licensing IP and communicating with industry. To ensure program managers are aware of the rights afforded the Federal Government and contractors in IP property and that program managers fully consider and use all available techniques and best practices for acquiring or licensing IP early in acquisition process. To encourage customized IP strategies for each system based on unique characteristics, the product support strategy, the industrial base strategy of the military department concerned, and the commercial market Cadre of IP Experts DoD shall establish a cadre of personnel expert in IP matters Goal is to ensure a consistent, strategic, and highly knowledgeable approach 29

30 2018 National Defense Authorization Act Section 835: Licensing of appropriate IP to support major weapon systems Would required DoD to work with contractors to determine prices for technical data the Department plans to acquire or license before selecting a contractor for the engineering and manufacturing development phase or the production phase of a major weapon system Would encourage program managers to negotiate with industry to obtain a custom set of technical data necessary to support program, rather than to a default approach that might seek greater rights than necessary. Section 871: Noncommercial software acquisition considerations Establishes considerations for the acquisition of noncommercial computer software - Curbs reliance on external or additional software code or data, unless included in items to be delivered. - But in the case of negotiated terms that do not allow for the inclusion of dependent software code or data, sufficient documentation to support maintenance and understanding of interfaces and software revision history. 30

31 Section 818: Post-Award Debriefing Rights Three components: disclosures, debriefings, deliberations #1: Disclosures of source selection determinations If a contract award is greater $100m, agency must disclose its written source selection determination If an award is greater than $10m but less than $100m, agency must allow a small business or nontraditional contractor to request such disclosure Must be implemented in DFARS after enactment of NDAA #2: Mandatory debriefings If a contract award or task/delivery order is greater than $10m, agency must provide a written or oral debriefing Must be implemented in DFARS after enactment of NDAA 31

32 Section 818: Post-Award Debriefing Rights (cont.) #3: Guaranteed deliberations (i.e., Q&A) Agency must allow a disappointed offeror to submit, within 2 business days after receiving a post-award debriefing, additional questions related to the debriefing Agency must respond in writing within 5 business days after receiving the questions Agency cannot close the debriefing until after written responses are delivered The 5-day filing period for obtaining a CICA stay does not commence until after written responses are delivered Effective upon enactment of NDAA 32

33 Sections 822 & 832: LPTA Limitations Section 822 would amend Section 813 of the 2017 NDAA, augmenting LPTA limitations Section 813 of 2017 NDAA still must be implemented As of 10/3/2017, Case Manager had forwarded a draft proposed rule to the DARS Regulatory Control Officer (DFARS Case No D017) Section 813 of the 2017 NDAA affirms DOD policy to avoid using [LPTA] in circumstances that would deny [DOD] the benefits of cost and technical tradeoffs Section 813 identified 6 criteria allowing for the use of LPTA; Section 822 of the 2018 NDAA would add 2 more 33

34 Sections 822 & 832: LPTA Limitations (cont.) LPTA should be used only when: 1. DOD can comprehensively & clearly describe the minimum requirements in terms of performance objectives, measures, and standards 2. There would be no/minimal value of a proposal exceeding minimum reqs. 3. Proposed technical approaches require no/minimal subjective judgment by SSA as to which proposal is more/less desirable 4. SSA has a high degree of confidence that a review of proposals (other than that submitted by the lowest bidder) would not result in greater value or benefit 34

35 Sections 822 & 832: LPTA Limitations (cont.) LPTA should be used only when (cont.): 5. CO prepares a written justification for using LPTA 6. DOD has determined that the lowest price reflects full life-cycle costs 7. *DOD would realize no/minimal innovation or technical advantage 8. *Goods procured are expendable, nontechnical, or have short life expectancy For 3 years, GAO will be required to submit an annual report to Congress identifying the number of instances DOD used LPTA for a contract exceeding $10m (*$5m under Section 822), including an explanation of how DOD considered these criteria 35

36 Sections 822 & 832: LPTA Limitations (cont.) Section 832 would prohibit the use of LPTA for the award of an EMD contract of a major defense acquisition program Major defense acquisition program: DOD program that is not a highly sensitive classified program and (a) that is designated by the Secretary of Defense as a major defense acquisition program, or (b) that is estimated to require an eventual total RDT&E expenditure of more than $300m or an eventual total expenditure of more than $1.8b (based on FY1990 constant dollars) EMD: a prime contract for engineering and manufacturing development 36

37 Section 827: Bid Protest Pilot Program Secretary of Defense shall carry out a 3-year pilot program to determine the effectiveness of requiring contractors to reimburse DOD for costs incurred in processing covered protests Covered protest : Denied in an opinion by GAO Filed by a party with revenues in excess of $250m during the previous year (based on FY2017 constant dollars) Filed on/after 10/1/2019 and on/before 9/30/2022 After the pilot program ends, Secretary must report to Congress on making the program permanent Implementation is delayed until 2 years after 2018 NDAA is enacted 37

38 Key Takeaways Greater incentive to complete incurred cost audits including the use of third party auditors. Materiality standards are difficult to implement. Commercial contracting methods continue to evolve. Subcontractor definition still unclear. Contractors should expect increased/enhanced negotiation of IP rights as DoD aims to improve its coordination, consistency, and customization of IP acquisition and licensing. 38

39 Open Forum Q&A 39